In a capital budgeting analysis, nominal cash flow is generally calculated as: A) Real cash flow × (1 + inflation rate)^t B) Real cash flow / (1 + inflation rate)^t C) Real cash flow ^{(1 + inflation rate)×t} D) (1 + inflation rate) × t × real cash flow

Question

Quizplus · Accepted Answer

Nominal cash flow is the real cash flow adjusted for inflation, therefore it is calculated by multiplying the real cash flow by (1 + inflation rate). So, the correct formula would be Real cash flow × (1 + inflation rate) to get the nominal cash flow.

In a Capital Budgeting Analysis, Nominal Cash Flow Is Generally